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Aaron's, Inc. Reports Record Third Quarter Revenue and Earnings Reaffirms and Tightens 2018 Annual Outlook

- Record Third Quarter Consolidated Revenues of $953.1 Million, Up 14%;
- Record Third Quarter Diluted EPS $0.62; Non-GAAP Diluted EPS $0.69, Up 60%
- Progressive Leasing Revenues Up 27%; EBITDA Up 32%
- Aaron's Business Same Store Revenue Flat To Prior Year

ATLANTA, Oct. 25, 2018 /PRNewswire/ -- Aaron's, Inc. (NYSE: AAN), a leading omnichannel provider of lease-purchase solutions, today announced financial results for the three months ended September 30, 2018.

Aaron's Inc. Logo

"This quarter demonstrates the strength of our model as we achieved solid growth in both revenue and earnings while we continued to invest in the future growth of our business," said John Robinson, Chief Executive Officer.

"Progressive achieved 32% EBITDA growth on a 27% increase in revenue, driven by strong invoice volume growth, consistent portfolio performance, and well-managed expenses. In addition, the team continues to execute on the conversion of our robust retail partner pipeline," continued Mr. Robinson.

"The Aaron's Business delivered improved same store revenue performance in the quarter, and year-over-year recurring revenue written into the portfolio was positive for the third consecutive quarter. I am proud of the team as they balanced the onboarding of 90 newly acquired franchised stores with the advancement of our business transformation. We continue to be encouraged by the improvements we are seeing in the business and the results of these initiatives," concluded Mr. Robinson.

Consolidated Results

For the third quarter of 2018, consolidated revenues were $953.1 million compared with $838.9 million for the third quarter of 2017, an increase of $114.2 million or 13.6%. Importantly, the Aaron's Business same store revenues were flat for the third quarter, which was a continuation of the improving trend in same store revenues experienced throughout 2018. The increase in consolidated revenues was primarily due to the 26.6% increase in revenues at Progressive and the addition of 90 franchised locations acquired by the Aaron's Business early in the third quarter of 2018.

Net earnings for the third quarter were $43.7 million compared to $25.3 million in the prior year period, an increase of $18.4 million or 72.5%.  Adjusted EBITDA for the Company was $82.5 million for the third quarter of 2018, compared with $67.7 million for the same period in 2017, an increase of $14.8 million, or 21.8%.  See "Use of Non-GAAP Financial Information" and the related non-GAAP reconciliation accompanying this press release.

Diluted earnings per share for the third quarter of 2018 were $0.62 compared with $0.35 a year ago, an increase of $0.27 or 77.1%. On a non-GAAP basis, earnings per share assuming dilution were $0.69 in the third quarter of 2018 compared with $0.43 for the same quarter in 2017, an increase of $0.26 or 60.5%.  As a reminder, third quarter 2017 results included the total estimated impact of both Hurricanes Harvey and Irma, which was in the range of $0.06 to $0.08 per share on a fully diluted basis.

The Company generated $363.0 million in cash from operations during the nine months ended September 30, 2018 and ended the third quarter with $35.0 million in cash, compared with a cash balance of $51.0 million at the end of 2017.  During the quarter, the company used $127.1 million for the acquisition of 90 franchised locations. Also during the quarter, the Company returned $33.6 million to shareholders through the payment of dividends as well as the repurchase of common stock totaling 675,552 shares for $31.6 million, or an average price of $46.72.  The Company has authorization to purchase an additional $400.0 million of its common stock.

Amendments to Term Loan Agreement and Franchisee Loan Facility

On October 23, 2018, the Company amended its revolving credit facility and term loan agreement primarily to increase the term loan by $137.5 million, to $225.0 million. The Company intends to use the incremental borrowings for general corporate and working capital purposes. The Company also amended its franchise loan facility to reduce the total commitment amount from $85.0 million to $55.0 million, and extend the maturity date to October 23, 2019.

Progressive Leasing Segment Results

Progressive Leasing's revenues in the third quarter of 2018 increased 26.6% to $504.4 million from $398.3 million in the third quarter of 2017.  Invoice volume increased 26.0% in the quarter, driven by a 21.4% increase in invoice volume per active door and a 3.8% increase in active doors to approximately 20,000.  Progressive Leasing had 808,000 customers at September 30, 2018, a 19.7% increase from September 30, 2017.

EBITDA for the third quarter of 2018 was $51.7 million compared with $39.3 million for the same period of 2017, an increase of 31.6%.  As a percentage of revenues, EBITDA was 10.3% for the third quarter of 2018 compared with 9.9% for the same period in 2017.  The provision for lease merchandise write-offs was 6.8% of revenues in the third quarter of 2018, compared with 6.2% in the same period of 2017.  Bad debt expense as a percentage of revenues remained consistent at 12.7% for both third quarter periods. For the full year 2018, we expect both bad debt expense and write-offs to be within the previously guided ranges of 10% to 12% and 5% to 7%, respectively.

The Aaron's Business Segment Results

For the third quarter of 2018, total revenues for the Aaron's Business increased 1.7% to $439.2 million from $431.7 million in the third quarter of 2017. The increase was primarily due to the acquisition of 90 franchised locations early in the third quarter of 2018. Same store revenues were flat in the third quarter of 2018, continuing the trend of improvement experienced throughout 2018. The Company expects that same store revenues will turn positive in the fourth quarter of 2018.  Customer count on a same store basis was down 5.3% during the third quarter of 2018.  Company-operated Aaron's stores had 989,000 customers at September 30, 2018, a 0.3% increase from September 30, 2017.

Lease revenue and fees for the three months ended September 30, 2018 increased 5.4%  compared with the same period in 2017.  Non-retail sales, which primarily consist of merchandise sales to the Company's franchisees, decreased 21.4% for the three-month period ended September 30, 2018 compared with the same period of the prior year.  The decline is attributed primarily to the franchise acquisitions completed in 2017 and 2018.

Adjusted EBITDA for the three months ended September 30, 2018 was $32.7 million compared with $30.8 million for the same period in 2017, an increase of $2.0 million or 6.3%. As a percentage of revenues, Adjusted EBITDA was 7.5% for the three months ended September 30, 2018 compared with 7.1% for the same period last year.

Write-offs for damaged, lost or unsaleable merchandise were 5.4% of revenues in the third quarter of 2018 compared with 5.2% for the same period last year.

At September 30, 2018, the Aaron's Business had 1,267 Company-operated stores and 432 franchised stores.  During the third quarter of 2018, the Company acquired 90 franchised stores and consolidated two Company-operated stores.  Additionally, during the quarter, no new franchised stores opened, six franchised stores closed and three franchised stores were sold to a third party.

Significant Components of Revenue

Consolidated lease revenues and fees for the three months ended September 30, 2018 increased 16.6% over the same prior year period.  Franchise royalties and fees decreased 8.9% in the third quarter of 2018 compared with the same period a year ago.  The decrease in franchise royalties and fees was the combined result of the lower number of franchised stores and decreases in revenues generated by the Company's franchisees.  Franchise revenues totaled $129.0 million for the three months ended September 30, 2018, a decrease of 27.6% from the same period for the prior year.  Same store revenues for franchised stores were down 3.1% and same store customer counts were down 3.5% for the third quarter of 2018 compared with the same quarter in 2017.  Franchised stores had 306,000 customers at the end of the third quarter of 2018.  Revenues and customers of franchisees are not revenues and customers of the Aaron's Business or the Company.

2018 Outlook

The Company is reaffirming and tightening its segment and consolidated 2018 annual outlook.

   

Current Outlook

Previous Outlook

(In thousands, except per share amounts)

 

Low

High

Low

High

Aaron's Inc. - Total Revenues

 

$

3,795,000

 

$

3,855,000

 

$

3,680,000

 

$

3,890,000

 

Aaron's Inc. - Adjusted EBITDA

 

382,500

 

395,500

 

380,000

 

413,000

 

Aaron's Inc. - Diluted EPS

 

2.75

 

2.90

 

2.90

 

3.20

 

Aaron's Inc. - Diluted Non-GAAP EPS

 

3.30

 

3.45

 

3.20

 

3.50

 

Aaron's Inc. - Capital Expenditures

 

70,000

 

80,000

 

70,000

 

90,000

 
           

Aaron's Business - Total Revenues

 

1,775,000

 

1,800,000

 

1,700,000

 

1,800,000

 

Aaron's Business - Adjusted EBITDA

 

170,000

 

175,000

 

170,000

 

185,000

 

Aaron's Business - Annual Same Store Revenues

 

(2.0)%

(1.0)%

(4.0)%

(1.0)%

           

Progressive - Total Revenues

 

1,985,000

 

2,015,000

 

1,950,000

 

2,050,000

 

Progressive - EBITDA

 

217,500

 

222,500

 

215,000

 

230,000

 
           

DAMI - Total Revenues

 

35,000

 

40,000

 

30,000

 

40,000

 

DAMI - Adjusted EBITDA

 

(5,000)

 

(2,000)

 

(5,000)

 

(2,000)

 
 

Conference Call and Webcast

The Company will hold a conference call to discuss its quarterly results on Thursday, October 25, 2018, at 8:30 a.m. Eastern Time.  The public is invited to listen to the conference call by webcast accessible through the Investor Relations section of the Company's website, aarons.com. The webcast will be archived for playback at that same site.

About Aaron's, Inc.

Headquartered in Atlanta, Aaron's, Inc. (NYSE: AAN), is a leading omnichannel provider of lease-purchase solutions.  Progressive Leasing provides lease-purchase solutions through more than 20,000 retail partner locations in 46 states.  The Aaron's Business engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its 1,699 Company-operated and franchised stores in 47 states, Puerto Rico and Canada, as well as its e-commerce platform, Aarons.com. Dent-A-Med, Inc., d/b/a the HELPcard®, provides a variety of second-look credit products that are originated through federally-insured banks.  For more information, visit investor.aarons.com, Aarons.com, ProgLeasing.com, and HELPcard.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements.  Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "believe," "guidance," "outlook," "expect," "will," "expectations," and "trends" and similar terminology.  These risks and uncertainties include factors such as changes in general economic conditions, competition, pricing, legal and regulatory proceedings and investigations, customer privacy, information security, customer demand, the execution and results of our strategy and expense reduction and store closure and consolidation initiatives (including the risk that the costs associated with these initiatives exceeds expectations), risks related to our recent franchisee acquisitions, including the risk that the financial performance from those acquisitions does not meet expectations, the business performance of our franchisees and our relationships with our franchisees; risks related to Progressive Leasing's "virtual" lease-to-own business, the outcome of Progressive Leasing's pilot or test programs with various retailers and the results of Progressive Leasing's efforts to expand its relationships with existing retailer partners and establish new partnerships with additional retailers, increases in lease merchandise write-offs and bad debt expense associated with Progressive Leasing's growth in doors and customers and changes in product mix, and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Statements in this release that are "forward-looking" include without limitation statements about: our expectations regarding the strength of our lease-to-own businesses; the results of our strategic investments, including our acquisition of franchisees; our financial objectives; our expectations regarding revenue and earnings growth due to our investments in the Aaron's Business and Progressive Leasing; whether those investments will strengthen our long-term competitive position; our ability to invest in our operations and in opportunities to promote growth; returning capital to our shareholders; the performance of the Progressive lease portfolio and expectations regarding the retail partner pipeline for Progressive; the outcome of the transformation initiatives for the Aaron's Business; the Company's projected results and the 2018 Guidance/Outlook set forth in this press release for the Company on a consolidated basis, and for Progressive Leasing, the Aaron's Business and DAMI, individually.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.  Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this press release.

 

Aaron's, Inc. and Subsidiaries
Consolidated Statements of Earnings
(In thousands, except per share amounts)

       
   

(Unaudited)
 Three Months Ended

(Unaudited)
 Nine Months Ended

   

September 30,

September 30,

   

2018

2017

2018

2017

Revenues:

         

Lease Revenues and Fees

 

$

880,871

 

$

755,318

 

$

2,596,876

 

$

2,217,029

 

Retail Sales

 

7,620

 

6,274

 

22,728

 

21,158

 

Non-Retail Sales

 

44,368

 

56,443

 

151,259

 

195,372

 

Franchise Royalties and Fees

 

10,153

 

11,140

 

35,140

 

38,165

 

Interest and Fees on Loans Receivable

 

9,508

 

8,936

 

28,258

 

25,669

 

Other

 

551

 

772

 

1,478

 

1,688

 

Total

 

$

953,071

 

$

838,883

 

$

2,835,739

 

$

2,499,081

 
           

Costs and Expenses:

         

Depreciation of Lease Merchandise

 

434,593

 

365,576

 

1,290,015

 

1,072,972

 

Retail Cost of Sales

 

4,877

 

4,380

 

14,695

 

13,711

 

Non-Retail Cost of Sales

 

35,214

 

50,750

 

130,302

 

174,653

 

Operating Expenses

 

420,602

 

374,157

 

1,199,171

 

1,033,530

 

Restructuring Expenses, Net

 

537

 

845

 

561

 

14,617

 

Other Operating (Income) Expense, Net

 

(38)

 

486

 

(286)

 

(586)

 

Total

 

$

895,785

 

$

796,194

 

$

2,634,458

 

$

2,308,897

 
           

Operating Profit

 

57,286

 

42,689

 

201,281

 

190,184

 

Interest Income

 

18

 

344

 

374

 

1,696

 

Interest Expense

 

(3,735)

 

(4,707)

 

(11,868)

 

(16,074)

 

Impairment of Investment

 

 

 

(20,098)

 

 

Other Non-Operating (Expense) Income, Net

 

(154)

 

895

 

458

 

3,033

 

Earnings Before Income Tax Expense

 

$

53,415

 

$

39,221

 

$

170,147

 

$

178,839

 
           

Income Tax Expense

 

9,695

 

13,880

 

35,680

 

63,863

 

Net Earnings

 

$

43,720

 

$

25,341

 

$

134,467

 

$

114,976

 
           

Earnings Per Share

 

$

0.64

 

$

0.36

 

$

1.93

 

$

1.62

 

Earnings Per Share Assuming Dilution

 

$

0.62

 

$

0.35

 

$

1.89

 

$

1.60

 
           

Weighted Average Shares Outstanding

 

68,819

 

70,746

 

69,521

 

70,914

 

Weighted Average Shares Outstanding Assuming Dilution

 

70,139

 

72,095

 

70,996

 

72,057

 
 

 

 

Selected Balance Sheet Data
(In thousands)

       
   

(Unaudited)

 
   

September 30, 2018

 

December 31, 2017

 
           

Cash and Cash Equivalents

 

$

34,986

   

$

51,037

   

Investments

 

   

20,385

   

Accounts Receivable, Net

 

92,311

   

99,887

   

Lease Merchandise, Net

 

1,196,812

   

1,152,135

   

Loans Receivable, Net

 

78,062

   

86,112

   

Property, Plant and Equipment, Net

 

216,337

   

207,687

   

Other Assets, Net

 

1,080,390

   

1,075,021

   
           

Total Assets

 

$

2,698,898

   

$

2,692,264

   
           

Debt

 

297,340

   

368,798

   
           

Total Liabilities

 

935,392

   

964,260

   

Shareholders' Equity

 

1,763,506

   

1,728,004

   
           

Total Liabilities and Shareholders' Equity

 

$

2,698,898

   

$

2,692,264

   

 

 

Selected Cash Flow Data
(In thousands)

     
   

(Unaudited)
 Nine Months Ended

   

September 30,

   

2018

 

2017

         

Cash Provided by Operating Activities

 

$

362,995

   

$

180,273

 

Cash Used in Investing Activities

 

(192,345)

   

(185,784)

 

Cash Used in Financing Activities

 

(186,700)

   

(176,899)

 

Effect of Exchange Rate Changes on Cash & Cash Equivalents

 

(1)

   

102

 

Decrease in Cash and Cash Equivalents

 

(16,051)

   

(182,308)

 

Cash and Cash Equivalents at Beginning of Period

 

51,037

   

308,561

 

Cash and Cash Equivalents at End of Period

 

$

34,986

   

$

126,253

 

 

 

Aaron's, Inc. and Subsidiaries
Quarterly Revenues by Segment
(In thousands)

   
 

(Unaudited)

 

Three Months Ended

 

September 30, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

504,407

 

$

376,464

 

$

 

$

880,871

 

Retail Sales

 

7,620

 

 

7,620

 

Non-Retail Sales

 

44,368

 

 

44,368

 

Franchise Royalties and Fees

 

10,153

 

 

10,153

 

Interest and Fees on Loans Receivable

 

 

9,508

 

9,508

 

Other

 

551

 

 

551

 
 

$

504,407

 

$

439,156

 

$

9,508

 

$

953,071

 
   
 

(Unaudited)

 

Three Months Ended

 

September 30, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

398,282

 

$

357,036

 

$

 

$

755,318

 

Retail Sales

 

6,274

 

 

6,274

 

Non-Retail Sales

 

56,443

 

 

56,443

 

Franchise Royalties and Fees

 

11,140

 

 

11,140

 

Interest and Fees on Loans Receivable

 

 

8,936

 

8,936

 

Other

 

772

 

 

772

 
 

$

398,282

 

$

431,665

 

$

8,936

 

$

838,883

 

 

 

Aaron's, Inc. and Subsidiaries
Nine Months Revenues by Segment
(In thousands)

   
 

(Unaudited)

 

Nine Months Ended

 

September 30, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

1,474,590

 

$

1,122,286

 

$

 

$

2,596,876

 

Retail Sales

 

22,728

 

 

22,728

 

Non-Retail Sales

 

151,259

 

 

151,259

 

Franchise Royalties and Fees

 

35,140

 

 

35,140

 

Interest and Fees on Loans Receivable

 

 

28,258

 

28,258

 

Other

 

1,478

 

 

1,478

 
 

$

1,474,590

 

$

1,332,891

 

$

28,258

 

$

2,835,739

 
   
 

(Unaudited)

 

Nine Months Ended

 

September 30, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

1,137,896

 

$

1,079,133

 

$

 

$

2,217,029

 

Retail Sales

 

21,158

 

 

21,158

 

Non-Retail Sales

 

195,372

 

 

195,372

 

Franchise Royalties and Fees

 

38,165

 

 

38,165

 

Interest and Fees on Loans Receivable

 

 

25,669

 

25,669

 

Other

 

1,688

 

 

1,688

 
 

$

1,137,896

 

$

1,335,516

 

$

25,669

 

$

2,499,081

 

 

Use of Non-GAAP Financial Information:

Non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP").  Non-GAAP net earnings and non-GAAP diluted earnings per share for the third quarter of 2018 each exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $3.0 million in amortization expense resulting from franchisee acquisitions, $0.6 million in acquisition transaction and transition costs related to franchisee acquisitions, $2.5 million in tax benefits related to a Tax Act adjustment and $0.5 million in restructuring charges.  For the first nine months of 2018 Non-GAAP net earnings and non-GAAP diluted earnings per share excludes $16.3 million in Progressive Leasing-related intangible amortization expense, $5.4 million in amortization expense resulting from franchisee acquisitions, $0.6 million in acquisition transaction and transition costs related to franchisee acquisitions, $0.6 million in restructuring charges, $2.3 million in net tax benefits related to Tax Act adjustments and $21.6 million of charges related to the full impairment of the Company's Perfect Home Investment and the related expenses incurred.  Non-GAAP net earnings and non-GAAP diluted earnings per share for the third quarter of 2017 exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $1.0 million in amortization expense resulting from franchisee acquisitions, $2.0 million in acquisition transaction and transition costs related to the franchisee acquisition and $0.8 million in restructuring charges.  For the first nine months of 2017 Non-GAAP net earnings and non-GAAP diluted earnings per share exclude $17.6 million in Progressive Leasing-related intangible amortization expense, $1.0 million in amortization expense resulting from franchisee acquisitions, $2.0 million in acquisition transaction and transition costs related to the franchisee acquisition and $14.6 million in restructuring charges.

The EBITDA and Adjusted EBITDA figures presented in this press release are calculated as the Company's earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes.  Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above.

Management believes that non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.

Non-GAAP net earnings and non-GAAP diluted earnings provides management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations.  This measure may be useful to an investor in evaluating the underlying operating performance of our business.

EBITDA and Adjusted EBITDA also provides management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes.  These measures may be useful to an investor in evaluating our operating performance and liquidity because the measures:

  • Are widely used by investors to measure a company's operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors.
  • Are a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness.
  • Are used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.

Finally, this press release presents pre-tax, pre-provision loss for DAMI, which is also a supplemental measure not calculated in accordance with GAAP.  Management believes this measure is useful because it gives management and investors an additional, supplemental metric to assess DAMI's underlying operational performance for the period.  Due to the growth of our originated credit card loan portfolio after our October 2015 acquisition of DAMI, we believe pre-provision, pre-tax loss helps investors to assess DAMI's operating performance until such time as the credit card portfolio reaches levels which management believes will be normal and recurring.  Management uses this measure as one of its bases for strategic planning and forecasting for DAMI.  Our use of pre-provision, pre-tax loss may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company's GAAP basis net earnings and diluted earnings per share and the GAAP earnings before income taxes of the Company's segments, which are also presented in the press release.  Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, Adjusted EBITDA and pre-tax, pre-provision loss may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

 

Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to Non-GAAP
Net Earnings and Earnings Per Share Assuming Dilution
(In thousands, except per share)

       
 

(Unaudited)
 Three Months Ended

 

(Unaudited)
 Nine Months Ended

 

September 30,

 

September 30,

 

2018

2017

 

2018

2017

Net Earnings

$

43,720

 

$

25,341

   

$

134,467

 

$

114,976

 

Add Progressive Leasing-Related Intangible Amortization Expense (1)(2)

4,186

 

3,503

   

12,616

 

11,314

 

Add Franchisee-Related Intangible Amortization Expense(3)(4)

2,288

 

673

   

4,163

 

670

 

Add Restructuring Expense, net (5)(6)

415

 

546

   

435

 

9,397

 

Add Acquisition Transaction and Transition Costs(7)(8)

499

 

1,275

   

501

 

1,268

 

Impairment of Investment and Related Expenses(9)

 

   

16,777

 

 

Tax Act Adjustments

(2,466)

 

   

(2,273)

 

 

Non-GAAP Net Earnings

$

48,642

 

$

31,338

   

$

166,686

 

$

137,625

 
           

Earnings Per Share Assuming Dilution

$

0.62

 

$

0.35

   

$

1.89

 

$

1.60

 

Add Progressive Leasing-Related Intangible Amortization Expense (1)(2)

0.06

 

0.05

   

0.18

 

0.16

 

Add Franchisee-Related Intangible Amortization Expense(3)(4)

0.03

 

0.01

   

0.06

 

0.01

 

Add Restructuring Expense, net(5)(6)

0.01

 

0.01

   

0.01

 

0.13

 

Add Acquisition Transaction and Transition Costs(7)(8)

0.01

 

0.02

   

0.01

 

0.02

 

Impairment of Investment and Related Expenses(9)

 

   

0.24

 

 

Tax Act Adjustments

(0.04)

 

   

(0.03)

 

 

Non-GAAP Earnings Per Share Assuming Dilution(10)

$

0.69

 

$

0.43

   

$

2.35

 

$

1.91

 
           

Weighted Average Shares Outstanding Assuming Dilution

70,139

 

72,095

   

70,996

 

72,057

 
                   

(1)

Net of taxes of $1,234 and $3,646 for the three and nine months ended September 30, 2018 calculated using the estimated tax rates of 22.77% and 22.42% for the respective periods.

(2)

Net of taxes of $1,918 and $6,284 for the three and nine months ended September 30, 2017 calculated using the effective tax rate for the respective periods.

(3)

Net of taxes of $675 and $1,203 for the three and nine months ended September 30, 2018 calculated using the estimated tax rates of 22.77% and 22.42% for the respective periods.

(4)

Net of taxes of $369 and $372 for the three and nine months ended September 30, 2017 calculated using the effective tax rate for the respective periods.

(5)

Net of taxes of $122 and $126 for the three and nine months ended September 30, 2018 calculated using the estimated tax rates of 22.77% and 22.42% for the respective periods.

(6)

Net of taxes of $299 and $5,220 for the three and nine months ended September 30, 2017 calculated using the effective tax rate for the respective periods.

(7)

Net of taxes of $147 and $145 for the three and nine months ended September 30, 2018 calculated using the estimated tax rates of 22.77% and 22.42% for the respective periods.

(8)

Net of taxes of $698 and $705 for the three and nine months ended September 30, 2017 calculated using the effective tax rate for the respective periods.

(9)

Net of taxes of $4,848 for the nine months ended September 30, 2018 calculated using the estimated tax rates of 22.42% for the respective period.

(10)

In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.

 

 

DAMI Pre-tax, Pre-provision Loss
(In thousands)

     
 

(Unaudited)
 Three Months Ended

(Unaudited)
 Nine Months Ended

 

September 30,

September 30,

 

2018

2017

2018

2017

Loss Before Income Taxes

$

(3,065)

 

$

(3,997)

 

$

(6,663)

 

$

(8,457)

 

Adjustment to Increase Allowance for Loan Losses During Period

1,552

 

1,449

 

1,684

 

3,838

 

Pre-tax, Pre-provision Loss

$

(1,513)

 

$

(2,548)

 

$

(4,979)

 

$

(4,619)

 
 

 

 

Aaron's, Inc. and Subsidiaries
Non-GAAP Financial Information
Quarterly Segment EBITDA
(In thousands)

   
 

(Unaudited)

 

Three Months Ended

 

September 30, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

43,720

 

Income Taxes1

     

9,695

 

Earnings (Loss) Before Income Taxes

40,839

 

15,641

 

(3,065)

 

53,415

 

Interest Expense

3,919

 

(960)

 

776

 

3,735

 

Depreciation

1,534

 

13,637

 

161

 

15,332

 

Amortization

5,420

 

3,242

 

145

 

8,807

 

EBITDA

$

51,712

 

$

31,560

 

$

(1,983)

 

$

81,289

 

Restructuring Expenses

 

537

 

 

537

 

Acquisition Transaction and Transition Costs

 

646

 

 

646

 

Adjusted EBITDA

$

51,712

 

$

32,743

 

$

(1,983)

 

$

82,472

 
 
 

(Unaudited)

 

Three Months Ended

 

September 30, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

25,341

 

Income Taxes1

     

13,880

 

Earnings (Loss) Before Income Taxes

27,734

 

15,484

 

(3,997)

 

39,221

 

Interest Expense

4,562

 

(1,124)

 

1,269

 

4,707

 

Depreciation

1,587

 

12,166

 

179

 

13,932

 

Amortization

5,421

 

1,474

 

145

 

7,040

 

EBITDA

$

39,304

 

$

28,000

 

$

(2,404)

 

$

64,900

 

Restructuring Expenses

 

819

 

26

 

845

 

Acquisition Transaction and Transition Costs

 

1,973

 

 

1,973

 

Adjusted EBITDA

$

39,304

 

$

30,792

 

$

(2,378)

 

$

67,718

 
   

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company segments.

 

 

Aaron's, Inc. and Subsidiaries
Non-GAAP Financial Information
Nine Months Segment EBITDA
(In thousands)

   
 

(Unaudited)

 

Nine Months Ended

 

September 30, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

134,467

 

Income Taxes1

     

35,680

 

Earnings (Loss) Before Income Taxes

120,393

 

56,417

 

(6,663)

 

170,147

 

Interest Expense

12,543

 

(2,993)

 

2,318

 

11,868

 

Depreciation

4,533

 

39,792

 

660

 

44,985

 

Amortization

16,262

 

7,048

 

435

 

23,745

 

EBITDA

$

153,731

 

$

100,264

 

$

(3,250)

 

$

250,745

 

Impairment of Investment and Related
     Expenses

 

21,625

 

 

21,625

 

Restructuring Expenses (Reversals), Net

 

571

 

(10)

 

561

 

Acquisition Transaction and Transition Costs

 

646

 

 

646

 

Adjusted EBITDA

$

153,731

 

$

123,106

 

$

(3,260)

 

$

273,577

 
         
 

(Unaudited)

 

Nine Months Ended

 

September 30, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

114,976

 

Income Taxes1

     

63,863

 

Earnings (Loss) Before Income Taxes

101,732

 

85,564

 

(8,457)

 

178,839

 

Interest Expense

14,023

 

(1,481)

 

3,532

 

16,074

 

Depreciation

4,522

 

35,719

 

479

 

40,720

 

Amortization

17,598

 

2,521

 

435

 

20,554

 

EBITDA

$

137,875

 

$

122,323

 

$

(4,011)

 

$

256,187

 

Restructuring Expenses

 

14,353

 

264

 

14,617

 

Acquisition Transaction and Transition Costs

 

1,973

 

 

1,973

 

Adjusted EBITDA

$

137,875

 

$

138,649

 

$

(3,747)

 

$

272,777

 
   

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company segments.

 

 

Reconciliation of 2018 Current Outlook for Adjusted EBITDA
(In thousands)

   
 

Fiscal Year 2018 Ranges

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Estimated Net Earnings

$196,100 - $206,100

Taxes1

56,000 - 59,000

Projected Earnings Before Taxes

$179,800 - $184,800

$81,500 - $86,500

$(9,200) - $(6,200)

252,100 - 265,100

Interest Expense

9,700

1,500

3,400

14,600

Depreciation

6,000

54,000

800

60,800

Amortization

22,000

10,000

32,000

Projected EBITDA

$217,500 - $222,500

$147,000 - $152,000

$(5,000) - $(2,000)

$359,500 - $372,500

Projected Other Adjustments, Net2

23,000

23,000

Projected Adjusted EBITDA

$217,500 - $222,500

$170,000 - $175,000

$(5,000) - $(2,000)

$382,500 - $395,500

   

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company divisions.

(2)

Projected Other Adjustments include the non-GAAP charges related to the Aaron's Business restructuring, the impairment of the PerfectHome investment and related expenses and one-time charges related to the franchisee acquisitions.

 

 

Reconciliation of 2018 Previous Outlook for EBITDA
(In thousands)

   
 

Fiscal Year 2018 Ranges

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Estimated Net Earnings

$209,000 - $234,000

Taxes1

68,000 - 76,000

Projected Earnings Before Taxes

$175,000 - $190,000

$112,000 - $127,000

$(10,000) - $(7,000)

277,000 - 310,000

Interest Expense

10,000

3,500

13,500

Depreciation

8,000

51,000

1,500

60,500

Amortization

22,000

7,000

29,000

Projected EBITDA

$215,000 - $230,000

$170,000 - $185,000

$(5,000) - $(2,000)

$380,000 - $413,000

   

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company divisions.

 

 

Reconciliation of 2018 Current Outlook for Earnings Per Share
Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution

   
 

Fiscal Year 2018 Range

 

Low

High

Projected Earnings Per Share Assuming Dilution

$

2.75

 

$

2.90

 

Add Projected Intangible Amortization Expense1

0.30

 

0.30

 

Add Sum of Other Adjustments2

0.25

 

0.25

 

Projected Non-GAAP Earnings Per Share Assuming Dilution

$

3.30

 

$

3.45

 
   

(1)

Includes projected intangible amortization related to the acquisition of Progressive Leasing and franchisee acquisitions.

(2)

Other Adjustments include the non-GAAP charges related to the Aaron's Business restructuring, impairment of the PerfectHome investment and related expenses, Tax Act adjustments and estimated one-time charges related to the franchisee acquisitions.

 

 

Reconciliation of 2018 Previous Outlook for Earnings Per Share
Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution

   
 

Fiscal Year 2018 Range

 

Low

High

Projected Earnings Per Share Assuming Dilution

$

2.90

 

$

3.20

 

Add Projected Intangible Amortization Expenses1

0.30

 

0.30

 

Projected Non-GAAP Earnings Per Share Assuming Dilution

$

3.20

 

$

3.50

 
   

(1)

Includes projected intangible amortization related to the acquisition of Progressive Leasing and the franchisee acquisition.

 

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/aarons-inc-reports-record-third-quarter-revenue-and-earnings-reaffirms-and-tightens-2018-annual-outlook-300737537.html

SOURCE Aaron's, Inc.

Aaron's, Inc., Michael P. Dickerson, Vice President, Investor Relations, 678.402.3950,Mike.Dickerson@Aarons.com ; SCR Partners, Jeff Black, 615.760.3679, JBlack@scr-ir.com